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On Our Radar

Lufthansa Unveils $19B Order for Boeing, Airbus Jets

Deutsche Lufthansa unveiled a $19 billion order for 59 wide-body jets On Thursday, split between Airbus and Boeing to replace its ageing fleet as it fights to win customers from fast-growing Middle East and low-cost rivals.

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The deal will see Lufthansa launch a new and larger version of Boeing's 777 long-range jet and expands on a sweeping fleet renewal by Europe's largest airline in terms of revenues after it signed up for 100 Airbus short-haul planes in March.

Lufthansa said the order for 34 Boeing 777-9X and 25 Airbus A350-900 jets, which the supervisory board had approved on Wednesday, would help it cut fuel consumption and shrink unit costs by about 20 percent compared with old aircraft models.

The carrier said on Thursday it had also taken out options on another 30 of each type of aircraft.

Lufthansa is in the middle of its most aggressive corporate restructuring campaign in two decades, which includes 3,500 job cuts, and is investing in modern jets to cut its fuel bill and catch up with rivals, particularly in the hotly fought-over routes between Europe and Asia.

Outgoing Chief Executive Christoph Franz warned against any let-up in restructuring efforts needed to pay for the new planes and better cabins and said management was committed to continuing with cost cuts even after his departure.

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"Without the successful implementation of (savings programme) SCORE, we will not earn the necessary funds to order these planes," Franz, who is stepping down next May to join Swiss drugmaker Roche, told a news conference in defence of cost cuts that have faced opposition from labour representatitives.

According to Lufthansa, the group's latest order represents the largest single private-sector investment in the history of German industry and will safeguard about 13,000 jobs at Lufthansa alone.

"Any company investing billions of euros has to believe in the economic viability of its business. And we do. We are aware that we have to earn the money that we are investing here," Franz said.

MAXIMUM FLEXIBILITY

The new aircraft will mainly replace the existing aircraft at Lufthansa, with the older Boeing 747-400s and Airbus A340-300s to be phased out by 2025.

People familiar with the matter told Reuters on Tuesday Lufthansa would order up to 34 Boeing 777-9Xs, marking the first order for the planned revamp of its successful mini-jumbo, but that 14 of these could be options needing to be reconfirmed.

Lufthansa said all 34 777-9X orders were firm, but that it had the flexibility to adapt to changing economic conditions.

"These new orders will help us leverage growth of about 3 percent per year," Franz said. "Contracts have been designed in such a way that we are fairly flexible. We have safeguarded certain options in the event of even stronger growth. And in the event of more sluggish growth, we can have an earlier rollover."

Lufthansa plans to use 30 of the new planes to replace Boeing 747-400s and Airbus A340-300s.

The other 29 planes will be used either to support its plans for 3 percent growth or to bring forward the retirement of other older-generation aircraft, the A340-600, sooner than planned.

Boeing reaffirmed plans to launch the 406-seat 777-9X by the end of the year. Meanwhile Airbus said the deal brought orders for its A350, which took its maiden flight in June, above the 700 mark.

Lufthansa will take first delivery of its A350-900 aircraft in 2016 and the 777-9X from 2020, the airline said.